Japan’s Production Slumps to 2011 Quake-Aftermath Low: Economy

Containers are stacked at a shipping terminal in Tokyo, Japan. Japan's exports fell for a sixth month in November and the trade deficit swelled, underscoring the challenge that incoming Prime Minister Shinzo Abe faces in reviving growth. Photographer: Kiyoshi Ota/Bloomberg

Dec. 28 (Bloomberg) -- Japan’s industrial output tumbled
more than forecast to the lowest level since the aftermath of
the record 2011 earthquake, bolstering the case for Prime
Minister Shinzo Abe to unleash large-scale stimulus.

The 1.7 percent drop in November from October exceeded all
27 forecasts in a Bloomberg News survey, a government report
showed today in Tokyo. The nation also remained mired in
deflation, with consumer prices excluding fresh food dropping
0.1 percent from a year before, compared with a central bank
goal of 1 percent and Abe’s desired target of 2 percent.

With neighbor South Korea reporting a jump in production
almost double the highest estimate among economists surveyed,
Japan’s data may strengthen the new Abe administration’s
determination to drive down the yen and force the Bank of Japan
to add monetary stimulus. On the fiscal front, Abe has told
ministries to compile emergency spending proposals by Jan. 7.

“Weakness in exports is the major drag on Japan’s
economy,” said Yoshimasa Maruyama, chief economist at Itochu
Corp. in Tokyo. “Given the weak state of the economy, Abe’s
government may need a large-scale stimulus program to boost
growth.”

Maruyama sees 5 trillion yen ($57.8 billion) to 10 trillion
yen of initial support measures and says that it’s “almost a
done deal” that the BOJ will move to a more aggressive
inflation target in January.

The MSCI Asia Pacific Index gained 0.4 percent as the
Nikkei 225 Stock Average climbed 0.7 percent to close with the
biggest annual gain since 2005. The yen weakened to the lowest
since August 2010 amid speculation of more stimulus.

Fiscal Steps

Retail sales stagnated in November, a separate report
showed in Tokyo today, while the jobless rate was 4.1 percent.
The seasonally adjusted industrial production index fell to 86.4,
the lowest level since April 2011.

“Monetary policy will be loosened further, while Abe will
introduce big fiscal pump-priming,” said Kiichi Murashima,
chief economist at Citigroup Inc. in Tokyo.

Japan’s economy contracted for the two quarters through
September, meeting the textbook definition of a recession. Gross
domestic product may shrink an annualized 0.5 percent in the
final three months of this year, according to the median
forecast in a Bloomberg News survey. Exports slid for a sixth
month in November on Europe’s crisis and tensions with China.

In contrast, South Korea’s industrial output exceeded
estimates in November and the nation’s current-account surplus
rose to a record, signaling that a growth recovery may take hold
in Asia’s fourth-largest economy.

Korean Gains

South Korea’s output rose 2.3 percent from October when it
advanced 0.7 percent, Statistics Korea said today. The median
estimate of 10 economists in a Bloomberg News survey was for a
0.8 percent gain. The surplus was $6.9 billion.

Improvements in the U.S. economy and signs of a rebound in
China are brightening the outlook for South Korea’s shipments
even as austerity measures in Europe set limits. President-elect
Park Geun Hye, who will take office in February, may oversee a 3
percent economic expansion next year after 2.1 percent growth in
2012, according to Finance Ministry estimates.

Elsewhere in Asia today, China Commerce Minister Chen
Deming said 2012 foreign trade growth may be about 6 percent,
the official Xinhua News Agency reported. Foreign direct
investment may be $110 billion this year, it said. Thailand
posted a current-account surplus of $392 million in November.

In France, the number of people actively looking for work
rose to the highest since April 1998 in November while a final
reading of the nation’s gross domestic product last quarter will
probably show a 0.2 percent expansion, a Bloomberg News survey
showed. Retail sales probably fell in Spain and rose at slower
pace in Sweden from a year earlier, separate surveys showed.